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| WGA > SEC Filings for WGA > Form 10-Q on 13-May-2009 | All Recent SEC Filings |
13-May-2009
Quarterly Report
Three Months Ended March 31, 2009 & 2008
For the first quarter ended March 31, 2009, net sales decreased by 22% to $11,604,000 from $14,916,000 in first quarter 2008. Overall video display volume declined 22% or $3.5 million due to a 62% unit decline in CRT sales and a 13% unit decline in LCD sales. Parts sales increased $0.4 million and used games sales decreased $0.2 million in the first quarter 2009 compared to the same quarter 2008. Gaming sales for the first quarter 2009 decreased by 17% to $10,469,000 from $12,618,000 in the first quarter 2008 due to a slow gaming market. Amusement sales decreased by 51% to $1,135,000 in the first quarter 2009 from $2,298,000 in the first quarter 2008 primarily due to lower replacement market sales. As a result, gaming sales accounted for 90% of total sales and amusement sales accounted for 10% of total sales in the first quarter 2009 compared to 85% and 15% respectively in the same quarter 2008.
Gross margin for the first quarter 2009 decreased $0.36 million to $2.08 million or 18.0% of sales compared to $2.44 million or 16.4% in the first quarter 2008 for a 1.6 point increase in margin percentage. The $3.3 million sales decline reduced the gross margin by $543,000, while the increase in margin percentage increased the gross margin by $185,000. The margin improvement was due to significantly higher parts margin and sales mix and some improvement in display margins due to a higher percentage being produced in China and improved purchasing. The company is concentrating on new parts lines with improved margin and introducing new lower cost video display product for the amusement and class II gaming markets.
Operating expense decreased by $295,000 in the first quarter 2009 compared to the same quarter 2008. However, operating expenses increased to 15.7% of sales in the quarter from 14.2% of sales in the same quarter last year due to lower sales. The operating expense reductions were due to a $105,000 decline in compensation and benefit expense due to lower headcount, a $85,000 decline in commission expenses primarily due to lower sales, a $42,000 decline in IT depreciation expense, and a $63,000 decline in other including legal and travel expenses. The Company continues to reduce its headcount and to place great emphasis on operating expense control.
Operating income declined $63,000 to $264,000 in the first quarter 2009 compared to $327,000 in the first quarter 2008 due to significantly lower sales. However, higher gross margins and lower operating expenses offset 88% of the decline in gross margin due to lower sales.
Interest expense was $58,000 in the first quarter 2009 compared to $114,000 in the first quarter 2008 due to lower average debt balances and lower interest rates. Other expense was $93,000 in the first quarter 2009 compared to $1,000 in the first quarter 2008 due to state tax audit settlement expenses.
Income tax expense was $10,000 in the first quarter 2009 compared to $13,000 in the first quarter 2008. The Company has available a net operating loss carry forward of approximately $6.1 million as of December 31, 2008.
Net income was $103,000 in the first quarter 2009 compared to $199,000 in the first quarter 2008. For the first quarter 2009 basic and diluted earnings per share was $0.01 compared to basic and diluted earnings per share of $0.02 in the first quarter 2008.
Liquidity & Capital Resources
Cash provided by operating activities during the first quarter ended March 31, 2009 was $1,042,000.
Accounts receivable decreased by $144,000 in the first quarter to $6,115,000 on March 31, 2009 due to the lower sales level compared to the fourth quarter 2008. Accounts receivable days outstanding increased to 48 days on March 31, 2009 from 44 days on December 31, 2008. Inventory decreased to $11,065,000 on March 31, 2009 compared to $11,786,000 on December 31, 2008. Days cost of sales in inventory increased to 106 days on March 31, 2009 from 96 days on December 31, 2008. Due from subcontractors increased more than due to subcontractors by $7,000 in the first quarter. Accounts payable decreased by $336,000 due to lower production. Accounts payable days outstanding were approximately 28 days on March 31, 2009 compared to 31 days at December 31, 2008 due to our paying vendors slightly faster. Accrued expenses increased by $145,000 in the first quarter.
Cash provided by investing activities was zero. Cash used by investing activities was $2,000 net of asset disposals.
Long-term notes payable decreased to $4,199,000 on March 31, 2009 from $5,185,000 on December 31, 2008 resulting in $986,000 of cash used for financing activities. Proceeds from options exercised were zero during the first quarter 2009.
Cash increased $54,000 from December 31, 2008 to $238,000 as of March 31, 2009.
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